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Phone 0800 1223 170

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Lines open: Mon - Fri 9am- 5:30pm

Phone 0800 1223 170

to make a telephone application

Lines open: Mon - Fri 9am- 5:30pm

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Copyright 2016 by Pension Tracing Service ® 

This service is not affiliated with the Department of Work and Pensions or any government body. The Pension Tracing Service does not offer financial advice to our clients. However we can allocate you an Authorised and Regulated Pension Specialist. 

Copyright 2016 by Pension Tracing Service ® 

This service is not affiliated with the Department of Work and Pensions or any government body. The Pension Tracing Service does not offer financial advice to our clients. However we can allocate you an Authorised and Regulated Pension Specialist. 

Inheritance tax

Inheritance tax

Inheritance tax as we know it was introduced by the Conservatives in 1986 when it was set at a rate of 60%. However, two years later it was reduced to 40%. The tax was intended to hit only the very wealthy and until recently, only a small percentage of estates had any inheritance tax liability.

With house prices having spiralled upwards, more and more middle class families have found themselves dragged into the inheritance tax net. The level at which inheritance tax becomes payable – known as the nil rate band or inheritance tax threshold – has risen steadily over the years and will keep doing so. It currently stands at £325,000 for 2011/12. Inheritance tax is usually paid on an estate when someone dies. It’s also sometimes payable on trusts or gifts made during someone’s lifetime. Inheritance tax exemptions Potentially exempt transfers (PETs) Most gifts to other people are classified as ‘potentially exempt transfers’ or PETs. If you survive for seven years after giving the gift, no inheritance tax is due at all. However, if you die within this period and the gift valued at less than the inheritance tax threshold, it will be added to the value of your estate. If it’s valued at more than threshold, the person receiving the gift will have to pay inheritance tax. But there’s a further complication because if you die between three and seven years after making the gift and the value of the gift is more than the threshold, the tax payable will be reduced by taper relief. Other exemptions include: Gifts between partners Gifts between a husband and wife or civil partners are exempt, providing they have their permanent home in the UK. Charities Gifts to UK established charities, national museums and universities and other certain bodies will be exempt. Even gifts to political parties, providing they are represented in Parliament with at least two MPs, are also exempt. Annual exemption Each year you can gift away up to £3,000, either as a single gift or as several gifts adding up to that amount. You can also used your unused allowance from the previous year. Small gifts You can make small gifts of up to £250 to as many people as you like. This can’t be combined with the £3,000 above. Wedding gifts Gifts for weddings or civil partnerships are also exempt up to a point. Up to £5,000 can be gifted from each parent of the couple, up to £2,500 from each grandparent, £2,500 from the bridegroom to bride or bride to bridegroom, and £1,000 from anyone else. Regular gifts out of income Any regular gifts you make out of your after-tax income are also exempt from inheritance tax. However, these gifts will only be exempt from tax if you have enough income left over after making the gifts to maintain your normal lifestyle.

Inheritance tax as we know it was introduced by the Conservatives in 1986 when it was set at a rate of 60%. However, two years later it was reduced to 40%. The tax was intended to hit only the very wealthy and until recently, only a small percentage of estates had any inheritance tax liability.

With house prices having spiralled upwards, more and more middle class families have found themselves dragged into the inheritance tax net. The level at which inheritance tax becomes payable – known as the nil rate band or inheritance tax threshold – has risen steadily over the years and will keep doing so. It currently stands at £325,000 for 2011/12. Inheritance tax is usually paid on an estate when someone dies. It’s also sometimes payable on trusts or gifts made during someone’s lifetime. Inheritance tax exemptions Potentially exempt transfers (PETs) Most gifts to other people are classified as ‘potentially exempt transfers’ or PETs. If you survive for seven years after giving the gift, no inheritance tax is due at all. However, if you die within this period and the gift valued at less than the inheritance tax threshold, it will be added to the value of your estate. If it’s valued at more than threshold, the person receiving the gift will have to pay inheritance tax. But there’s a further complication because if you die between three and seven years after making the gift and the value of the gift is more than the threshold, the tax payable will be reduced by taper relief. Other exemptions include: Gifts between partners Gifts between a husband and wife or civil partners are exempt, providing they have their permanent home in the UK. Charities Gifts to UK established charities, national museums and universities and other certain bodies will be exempt. Even gifts to political parties, providing they are represented in Parliament with at least two MPs, are also exempt. Annual exemption Each year you can gift away up to £3,000, either as a single gift or as several gifts adding up to that amount. You can also used your unused allowance from the previous year. Small gifts You can make small gifts of up to £250 to as many people as you like. This can’t be combined with the £3,000 above. Wedding gifts Gifts for weddings or civil partnerships are also exempt up to a point. Up to £5,000 can be gifted from each parent of the couple, up to £2,500 from each grandparent, £2,500 from the bridegroom to bride or bride to bridegroom, and £1,000 from anyone else. Regular gifts out of income Any regular gifts you make out of your after-tax income are also exempt from inheritance tax. However, these gifts will only be exempt from tax if you have enough income left over after making the gifts to maintain your normal lifestyle.

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